Re: Don't believe the offshore hype?

["Richard G. Combs" <richard -dot- combs -at- voyanttech -dot- com>]

France Baril wrote:

> Sure, Indian workers are cheaper than us, but as they learn
these new skills, they also get paid more then other workers in their
country. The result is that they have more money to spend and they are
also becoming a market. More and more companies are starting to generate
great sales revenus in India. The market lost in our part of the world
can be overcome by the market gained in other parts of the world.
>
> Share the work, share the wealth, share the market...

A recent Thomas Friedman column (available at
http://www.iht.com/articles/131494.html) provided a concrete example of
France's point. Friedman was visiting the 24/7 call center in India and
spoke with 24/7's founder, S. Nagarajan. He wrote:

"Well, he answered patiently, 'look around this office.' All the computers
are from Compaq. The basic software is from Microsoft. The phones are from
Lucent. The air-conditioning is by Carrier, and even the bottled water is by
Coke, because when it comes to drinking water in India, people want a
trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the
shares in 24/7 are owned by U.S. investors. This explains why, although the
U.S. has lost some service jobs to India, total exports from U.S. companies
to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What
goes around comes around, and also benefits Americans."

This isn't rocket science, just basic economics. All the progress in human
history is a consequence of the drive to use resources (capital, labor, and
raw materials) more efficiently in order to produce goods and services more
cheaply. This process makes the world richer and everyone everywhere better
off in the long run.

Of course, in the short run, some people benefit immediately (people
working -- or applying for jobs -- at Compaq, which sold a few thousand
computers to the 24/7 call center), while others are temporarily hurt (the
laid-off US call center workers). Do we stop or slow economic progress,
making us all poorer, in order to avert or ease the temporary pain of a few?

We've tried that, with disastrous consequences. Study the economic history
of the Great Depression. It was triggered in large part by the Hoover
administration's desire to "protect American workers" (Smoot-Hawley
tariffs), and it was lengthened and deepened by Roosevelt's ill-considered
measures to "ease the pain."

At the Indian Institute of Journalism and New Media
(http://iijnm.org/thomas_friedman.html), Friedman was asked why Americans
don't recognize how outsourcing benefits everyone:

"...Friedman said, 'People who are hurt by trade know who they are and
people who are benefiting don't.' Those who lose jobs to outsourcing
mobilize politically, he said.

"'People who benefit by trade tend not to be mobilized,' he said."

When a plant closes or people are laid off, the effect is concentrated and
highly visible. Headlines and news stories declare "600 Jobs Lost" and
document the plight of those affected. But there aren't any headlines or
news stories about the people who benefit, because they're scattered about
all over the place.

The outsourcing of call center jobs to Bangalore led to some new hires at
places like Compaq, Lucent, and Carrier -- not to mention the really hidden,
more indirect effects at shipyards, packaging companies, printers,
accounting and law firms, etc., etc. But, since there is no single place
where 600 new jobs pop up, no one notices.

The number of new jobs created is probably greater than the number of jobs
lost, and they're undoubtedly better jobs, on average. In the long run, this
_must_ be the case. By spending less to produce the same level of goods and
services, we've freed up money to produce a new, higher level of goods and
services.

The money saved on call center services (or writing software procedures)
will inevitably be spent on work that's more _valuable_ than call center
services (or writing software procedures). Call me hard-nosed, but those
whose less-valuable jobs are being replaced have the incentives and
self-knowledge -- and thus are obliged -- to prepare themselves for and get
a more-valuable job. After all, they'll reap the long-term benefits from
doing so.

While I was writing this, Eric Dunne posted a message (decidedly *not* an
"incoherent rant") with many excellent points, including:

> The only way you can keep all the jobs and conditions as they are today is
> to punish innovation and reward mediocrity.

Bravo. What he said. Especially the part about how we define "other"
locales. How is a Boston job moving to Bangalore different from the same job
moving to Pascagoula, Mississippi? Hmm?

"It's my opinion and it's very true."

Richard


------
Richard G. Combs
Senior Technical Writer
Voyant, a division of Polycom, Inc.
richardDOTcombs AT polycomDOTcom
richardDOTcombs AT voyanttechDOTcom
303-223-5111
------
rgcombs AT freeDASHmarketDOTnet
303-777-0436
------









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